Which? researchers visited 40 advisers and found that only a third of them met all the benchmarks for good advice set by the consumer magazine.
Overall, five out of 12 equity release specialists passed the Which? test from Just Retirement, Key Retirement Solutions, Age Partnership, Home & Capital, Aviva and Prudential.
It also found that eight of the 28 IFAs mystery shopped met the Which? benchmark.
It says 23 advisers tested failed to carry a fact-find and seven didn’t even ask about the researcher’s income. Some advisers didn’t mention how quickly the debt would grow or discuss the effect of compound interest. One IFA said there was no chance of using up all the equity in the customer’s’ home “unless you live to 150”.
Also, almost half of the advisers didn’t mention or dismissed out of hand home reversion plans.
Which? editor Martyn Hocking says: “Which?’s investigation has uncovered some major flaws in the equity release advice process. We’d like to see a tightening up of the advice process.”
KRS group director Dean Mirfin says this research should be a wake-up call to all advisers working in the sector, not just for those singled out. He says: “This is very disappointing, and I am sure my advisers did their jobs correctly, but we will show this to all KRS staff and reminding them how easy it is to do it wrong.
“It’s time we stopped defending the sector as a whole as we hear of advisers giving bad advice all the time. If there are people out there not doing the job as they should, this will hopefully make them take a long, hard look at their proposition and consider leaving equity release. In that sense, this Which? study is of value.”
Safe Homes Income Plans director general Andrea Rozario warns that what has been excluded as well as what has been included needs to be remembered when looking at this research.
She says: “Although there are estimated to be over 7000 people who have taken the specialist equity release exams, the fact that Which? has found issues with the processes of some of the 40 advisers reviewed shows there is absolutely no room for complacency.”
Bridgewater Equity Release compliance and communications Manager Alison Beeston says: “We are surprised at the significant numbers Which? found who are not providing, at the very least, generic information about the products.
“In order for the adviser community to avoid further criticism of this nature, advisers must actively consider the plans in any discussion of equity release.”